GOLDMOHUR DESIGN AND APPAREL PARK LTD., MUMBAI V. PR. COMM. OF INCOME TAX - 7, MUMBAI

MA 123/MUM/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4982 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-03-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Search and seizure; Principle of natural justice; Reason to believe; Revenue expenditure
• Section: 32; 147; 37; 263; 254(2); 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “G" BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER MA.No. 123/MUM/2021 [ARISING OUT OF ITA.No. 3971/MUM/2017 (A.Y. 2012-13)] Goldmohur Design and Apparel Park Ltd., 145, GoldMohur Milll Dada Saheb Phalke Road Dadar (E), Mumbai - 400014 PAN: AADCG1613M v. Pr.CIT -7 Room No. 628, 6th Floor Aayakar Bhavan M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee by : Shri Vipul Doshi Department by : Shri Hoshang B. Irani Date of Hearing : 17.12.2021 Date of Pronouncement : 15.03.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application assessee is requesting to rectify the mistakes which are crept in the ITAT order in ITA.No. 3971/Mum/2017 dated 31.07.2020 for the A.Y.2012-13. MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 2 2. At the time of hearing, Ld. AR brought to our notice the background of the appeal and findings of the Tribunal, the brief submissions are reproduced below: - “3.1 The background leading to filing of the appeal as well as the issues (factual and legal) raised for consideration before the Hon'ble ‘Tribunal get reflected in the Paper Book, Short Note, Legal Notes, etc. filed before the Hon'ble Tribunal. So avoid repetition and for the sake of brevity, the same are not repeated herein, However, for the limited purpose of the present application, the broad points of arguments as canvassed by the Applicant can be summarised as under, which were supported by case laws: (A) The revision order without jurisdiction This was based on the following grounds; (i) The various remedial powers given to the Department under the Act are mutually exclusive. In the present case, the correct remedial power, if at all, was invoking the provisions of section 147 of the Act and not section 263 of the Act [Para 8 (iii), Pg 17 - 18 of the order of Hon’ble Tribunal]. (B) The assessment order was not erroneous This was based on the following grounds: (i) The action of the AO. in allowing depreciation claim was not only legally valid but, in fact, was the only course available to him. This was because, in terms of scheme of the Act and as per the settled legal position, an assessing officer has no jurisdiction to revisit the issue of allowing depreciation in any subsequent year when the said claim was held allowable in the first year of the claim after proper verification and enquiry: especially when there is no change in any fact or law. In other words, allowability of claim in a subsequent year is purely consequential in such a case [Para 8 (i), Pg. 13-14, Para 5, Pg. 9 of the order of Hon'ble Tribunal]. (ii) Even on merit, based on the facts and legal position brought on record, the depreciation on the capital asset, being a valuable commercial right, was fully allowable [Para 14, Pg. 28 of the order of Hon'ble Tribunal]. (ii) Otherwise also, the the Assessing Officer (‘the A.O.’), in the present case, had again visited the issue of allowability of the MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 3 depreciation claim, had sought explanation from the Applicant and ultimately had allowed the claim only after proper and independent application of mind to the facts and the legal position. It was not even the case of the PCIT / Department that there was any non- application of mind on the part of the Assessing Officer which led to the assumption of jurisdiction u/s. 263 of the Act [Para 5, Pg. 9 of the order of Hon’ble Tribunal]. (iv) In any case, in the above circumstances, issue could be regarded at at least as a possible view entertained by the A.O., and, consequently, the assessment order could not have been regarded as ‘erroneous’ within the meaning of section 263 of the Act |Para 4, Pg. 7, Para 8 (iv), Pg. 19 - 20, Para 12, Pg. 25 of the order of Hon’ble Tribunal]. (C) The revision order is bad in law This was based on the following grounds: (i) No proper and effective opportunity of being heard was granted to the Applicant in course of the revision proceeding |Para 8 (ii), Pg. 14 - 15 of the order of Hon’ble Tribunal]. (ii) The grounds on which the ultimate revision order was passed travelled beyond the grounds given in the show - cause notice. No adverse inferences could have been drawn in respect of the issues which were never confronted to the Applicant, cither in the show cause notice or in course of the revisional proceeding. In the present case, the only ground / reason on the basis of which the assessment order was proposed to be revised was that the claim for depreciation cannot be allowed as the leasehold right does not come within the meaning of ‘intangible assets’ as contemplated in the section 32 (1) (ii) of the Act. As such there was no whisper about any other grounds or reason on the basis of which the assessment order was sought to be revised [Para 4, Pg. 7 - 8 of the order of Hon'ble Tribunal]. (iii) The PCIT has given specific direction to disallow the claim of depreciation, which is not permissible [Legal Note]. (iv) The PCIT failed to deal with various other factual and legal aspects which were raised by the Applicant by way of exhaustive written submission that was filed during course of the revisional proceedings. The PCIT was obligated to deal with all the objections, which were raised by the Applicant in the course of revisional proceeding {Para 4 - 5, Pg. & - 9 of the order of Hon'ble Tribunal]. MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 4 D) Without prejudice (i) Without prejudice, the expense of stamp duty payment was allowable as revenue expenditure u/s. 37 of the Act (Para 5, Pg. 10 of the order of Hon’ble Tribunal]. (ii) Alternatively, such stamp duty expenses was allowable as deferred revenue expenditure [Para 5, Pg. 10 of the order of Hon'ble Tribunal]. 3.2 In reply, the learned Departmental Representative did not put any argument on the aspect of jurisdiction of the PCIT under section 263 of the Act., apart from merely supporting the revision order. On the merits of the case, apart from merely reiterating that the rights acquired by the Applicant cannot be regarded as ‘intangible asset’, he simply raised the issue of non-registration of the lease agreement and submitted that the claim of depreciation could not be allowed on this ground itself. 3.3 Ultimately, in the order, the Hon'ble Tribunal did take judicial note of the facts and legal position as canvassed by the Applicant and summarised the same in its order. The Hon'ble Tribunal also, in principal, agreed with the legal propositions as canvassed by the Applicant, some of which are summarised as under: (i) Where a claim for depreciation is allowed by the A.0. while framing the assessment for the preceding year, then, no infirmity would arise from allowing of such depreciation on the opening WDV of the said asset / assets in the immediately succeeding year.’ [Para 8 (I), Pg, 13 of the order of Hon'ble Tribunal]. (ii) ‘Admittedly we are in principally in agreement with the aforesaid claim of the ld. A.R that a revisional authority as a part of the mandate of law, or in fact as per the canons of natural justice, is precluded frum drawing any adverse inference as regards any issue in respect of which no opportunity of being heard was afforded ta the assessee in course of the revisional proceedings’ [Para 8 (ii), Pg. 15 of the order of Hon'ble Tribunal]. The Hon'ble Tribunal further held that ‘In our considered view, as the Pr. CIT had drawn adverse inferences as regards the issues stated at Sr. No. (i) to (iv), without calling for any explanation, the same cannot be sustained and are liable to be vacated,......... and thus to the said extent vacated.’ (Para 8 (ii), Pg. 17 of the order of Hon’ble Tribunal]. (iii) ‘We are in agreement with the contention advanced by the Ld. A.R that the powers vested with the respective authorities MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 5 under the aforesaid statutory provisions, subject to satisfaction of the conditions therein envisaged, operate in their respective field.’ [Para 8 (iii), Pg. 18 of the order of Hon’ble Tribunal]. (iv) ‘Also, in a case where the A.O had adopted one of the possible views which is permissible in law, the CIT would stand divested from assuming jurisdiction under Sec. 263, for the purpose of substituting his view as aguinst that arrived at by the A.O. Further, there is no dispute on the aspect that unlike a case of lack of inquiry or no inquiry by the A.O, a case of inadequate inquiry by the A.O would not justify assumption of jurisdiction by the CIT under Sec. 263 of the Act. Also, we are in agreement with the claim of the ld. A.R, that merely because the A.O in his assessment order had not made an elaborate discussion in respect of an issue which was considered by him in the course of the assessment proceedings, would not on the said standalone basis justify assumption of jurisdiction by the CIT u/s 263 of the Act.” [Para 9, Pg. 21 of the order of Hon'ble Tribunal]. (v)` With respect to the arguments of non-registration raised by the Ld Departmental Representative, the Hon’ble Tribunal held that ” in the backdrop of the fact that the said ground had not formed the basis of the decision given by the Pr. CIT in his order passed u/s 263, the same cannot be entertained on our part. As per the settled position of law, the Tribunal cannot uphold the order of the Pr. CIT/CIT on any other ground which, in its opinion, was available before the revisional authority.” [Para 11, Pg. 24 of the order of Hon'ble Tribunal]. (vi) With respect to the decision of Hon’ble Delhi High Court in the case of Areva T & D India Ltd. v/s. DAT - [(2012) 345 ITR 421 (Dei)j, the Hon dle Tribunal observed as follows: “On the basis of its aforesaid observations, it was observed by the Hon'ble High Court that in case of the assessee before them, intangible assets, viz, business claims; business information; business records: contracts; employees, and knowhow, all were assets, which were invaluable and facilitated the carrying on the transmission and distribution business by the assessee, which was hitherto being carried out by the transferor, without any interruption. Accordingly, it was observed by the High Court, that the aforesaid intangible assets were, therefore, comparable to a license to carry out the existing transmission and distribution business of the transferor It was further observed by the Hon'ble High Court, that in the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period. whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business” [Para 13, Pa 27 of the order Hon'ble Tribunal]. MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 6 (viii) Such expenses incurred by the Applicant towards payment of stamp duty are revenue expenditure [Para 14, Pg. 28 - 29 of the order of Hon'ble Tribunal]. 3.4 Significantly, all the basic facts, admittedly, remained accepted / undisputed, even to the admission of the Department. So is the case with the basic legal position. 4. However, the Hon’ble Tribunal, ultimately, has upheld the validity of the revision order on the grounds as discussed in the order of the Hon’ble Tribunal. 5. In the above background, in the most humble opinion of the Applicant, following mistakes have crept in the order of the Hon’ble Tribunal, which go to the very root of the revision order: 5.1 One of the grounds of challenge was that the ground on which the revision order is passed is different from the grounds for which the show cause was issued and the Applicant was not given any opportunity / not confronted with the grounds which form basis of the final order. The Hon'ble Tribunal accepted this broad legal position. The Hon'ble Tribunal, having given the categorical findings at page 17 - that the four grounds as relied upon by the PCIT to support his ultimate order were without calling for any explanation as regards the same from the Applicant, the only logical and legal conclusion arising therefrom was that the order of the PCIT was vitiated and bad in law. 5.2 Further, the Hon’ble Tribunal categorically accepted the legal position that where a claim for depreciation is allowed by the A.O. while framing the assessment for the preceding year then no infirmity arises from allowing of such depreciation on the opening WDV of the said asset / assets in the immediately succeeding year. Having clearly accepted this factual and legal position, the logical! conclusion that could emerge was that not only the action of the A.O. was not erroneous but, in fact, was in accordance with the law, Significantly, this legal position has been admitted by the Department. Most importantly, while invoking the revision jurisdiction, and in fact even while passing the revision order, the PCIT had not at all referred / relied upon any subsequent development. Even otherwise, the Applicant had in the Legal Note clearly drawn attention to the legal position that whether an assessment order is erroneous or not is to be judged on the basis of the factual and legal position as on the date on which the assessing officer passed the assessment order, supported by judicial precedents. These judgements remained uncontroverted. MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 7 5.3 The most important aspect is that, admittedly, the Applicant had taken alternate ground before the PCIT as well as before the Hon'ble Tribunal that, without prejudice, the expenses towards stamp duty were allowable as revenue expenditure u/s. 37 of the Act and further, the revision order was bad in law also because the PCIT had erred in not adjudicating this vital alternative ground. In fact, this proposition has been accepted by the Hon’ble Tribunal in Para 14 of the order, by referring to various judicial precedents, including the Jurisdictional Bombay Court. Most significantly, the Hon’ble Tribunal ultimately, rejected the claim of depreciation on the basis of this very alternative legal position as canvassed by the Applicant. However, this very vital alternative ground has remained to be adjudicated altogether, which was otherwise also simply a logical and legal consequence of the legal findings of the Hon'ble Tribunal. 5.4 The Applicant further submits that there was also confusion / contradiction by the PCIT while giving direction to the assessing officer. While in the initial part of Para 8, the PCIT categorically directed the assessing officer to disallow the depreciation, at the later part of the same para, he directed the assessing officer to decide the issue only after examining the facts properly and after giving proper opportunity of being heard to the Applicant [Para 3, Pg. 6 of the order of Hon'ble Tribunal]. As pointed out in the Legal Note, it is a well - settled legal position that a revision authority cannot give specific direction to the assessing officer under section 263 of the Act. This another important legal issue also has remained to be adjudicated. 5.5 The Hon'ble Tribunal also accepted the legal position that various remedial powers under the Act, like, revision, reassessment, rectification, etc. are mutually exclusive and not overlapping. It is also not disputed that the first year in which the depreciation was granted [A.Y. 2011 - 2012], the Department itself had not found that assessment order erroneous within the meaning of section 263 of the Act but found the same as a case of income escaping assessment u/s 147 of the Act. Consequently, action of the PCIT in invoking revision jurisdiction u/s. 263 in the present year, though having the same facts as A.Y. 2011 - 2012, was clearly without jurisdiction and bad in law. Having clearly accepted legal position that various remedial powers under the Act, like, revision, reassessment, rectification, etc. are mutually exclusive and not overlapping, applying this legal position to the facts of the Applicant’s case, the logical conclusion that could emerge was that the correct remedial power was invoking the provisions of section 147 of the Act and not section 263 of the Act | Para 8 (iii), Pg. 17 - 19 of the order of Hon'ble Tribunal]. MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 8 6. In the circumstances, the Applicant most respectfully submits that the order of the Hon’ble Tribunal may be suitably amended / modified and / or the Hon’ble Tribunal may be pleased to pass such order or direction as it may deem fit.” 3. On the other hand, Ld. DR submitted that the submissions made by the Ld. AR leads to review of the order which is not permitted u/s.254(2) of the Act. 4. Considered the rival submissions, with regard to Para 5.2: The assessee applicant has failed to point out that as to how its claim that the factual and legal position on the date on which the Assessing Officer had passed the order would govern his jurisdiction qua holding the assessment order as erroneous in so far it is prejudicial to the interest of the revenue, will have any adverse bearing on the order passed by the CIT u/s 263 of the Act. In fact, the assessee in the garb of his aforesaid contention had basically sought a review of the order passed by the Tribunal, which we are afraid is not permissible as per the mandate of law. 5. Coming to the Mistake Mentioned in Para 5.3 : The assessee applicant has tried to impress that now when its claim for depreciation on the value of stamp expenses had been disallowed by the Tribunal by drawing support from certain judicial pronouncements wherein it was MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 9 held that the same was in the nature of a revenue expenditure, therefore, it was incumbent on its part to have directed that the said expenditure be allowed as a revenue expenditure in the preceding year in which the same was incurred. In our considered view, the aforesaid contention of the assessee cannot be accepted. As held by the Hon’ble Supreme Court in the case of CIT v. Manick Sons (1969) 74 ITR 1 (SC), as the tribunal while disposing off an appeal can give directions pertaining to the assessment year before it and not pertaining to any other year, therefore, the aforesaid claim of the assessee seeking a direction for allowing of the value of stamp expenses as a revenue expenditure in the preceding year, i.e, a year prior to the year under consideration before the tribunal, being devoid and bereft of any merit cannot be accepted. 6. Coming to the Mistake Mentioned in Para 5.4: As regards the claim of the assessee applicant, that the Pr. CIT on the one hand had directed the A.O to disallow the claim of depreciation on the value of stamp expenses and re-compute the income of the assessee under the head “business or profession”, while for on the other hand directed him to decide the issue only after examining the facts properly in accordance with law and allowing an appropriate opportunity to the assessee to MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 10 substantiate its claim, we are of the considered view, though at the first blush is found to be self-contradictory, but, a perusal of the said observation in the background of the order of the tribunal reveals beyond doubt that the Pr. CIT had clearly held that the assessee was not entitled for claim of depreciation on the value of the stamp expenses. In our considered view, the approach adopted by the assessee applicant in divorcing few words or lines from the entire context and reading the same in isolation cannot be accepted. 7. Coming to the Mistake Mentioned in Para 5.5: Apropos the assessee’s contention that while for its claim of depreciation on the value of stamp expenses in the preceding year i.e A.Y 2011-12 was dislodged by the department by taking recourse to Sec. 147 of the Act, but the same had been so done by resorting to exercise of revisional jurisdiction during the year under consideration, we find an issue that had been dealt with at length by the Tribunal while disposing off the appeal, as under:- “(iii). We shall now advert to the claim of the ld. A.R that as the statutory powers vested under Sec. 147 and Sec. 263 are mutually exclusive and not overlapping, therefore, the withdrawal of the assessee’s claim of depreciation on stamp duty deposit in respect of the lease agreement by exercise of revisional powers u/s 263 during the year under consideration, clearly militated against withdrawal of such depreciation by reopening of its case u/s 147 in MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 11 the immediately preceding year i.e A.Y 2011-12. In the backdrop of his aforesaid contention, it was averred by the ld. A.R that now when the assessee’s claim for depreciation on leasehold rights for the immediately preceding year i.e A.Y. 2011-12 was withdrawn by the revenue by taking recourse to re-assessment proceedings under Sec. 147 of the Act, there was thus no justification in withdrawing such claim of depreciation for the year under consideration by assumption of jurisdiction by the Pr. CIT under Sec. 263 of the Act. In support of his aforesaid contention the ld. A.R had relied on certain judicial pronouncements viz. (i) Karin Tharuvi T. States Ltd. Vs. State (1963) 48 ITR 83 (SC); (ii) CIT Vs. D.N. Dosani (2006) 280 ITR 275 (Guj); (iii) Samtalal Mehendi Ratta (HUF) Vs. CIT (2006) 143 STC 511 (Gau); and (iv) Hariom Bansal Vs. ITO (2012) 51 SOT 118 (Chennai). We have given a thoughtful consideration to the aforesaid contention of the ld. A.R, and perused the material available on record, as well as the judicial pronouncements relied upon by him. Admittedly, the powers vested with the respective authorities under Sec. 147 and under Sec. 263 of the Act, are separate and distinct, which subject to fulfilment of the requisite conditions contemplated in the said respective statutory provisions, operate in their respective fields. In so far, the powers vested with the A.O under Sec. 147 are concerned, the same can be exercised where the A.O has a reason to believe that any income of the assessee chargeable to tax has escaped assessment. On the other hand, the powers vested with the Pr. CIT/CIT under Sec. 263 of the Act can be exercised, where such revisional authority finds that the order passed by the assessing officer is erroneous in so far it is prejudicial to the interest of the revenue. As observed by us hereinabove, we are in agreement with the contention advanced by the ld. A.R that the powers vested with the respective authorities under the aforesaid statutory provisions, subject to satisfaction of the conditions therein envisaged, operate in their respective fields. In our considered view, as long as the conditions contemplated in the respective sections for assumption of jurisdiction by the concerned authorities are satisfied, there cannot be any bar on exercise of the same by the concerned revenue authority. In the case before us, the Pr. CIT held a conviction that the allowing of the assessee’s claim for depreciation on the leasehold rights by the A.O, had rendered the latters order as erroneous to the extent it was prejudicial to the interest of the revenue. We are unable to persuade ourselves to subscribe to the MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 12 contention of the ld. A.R, that as the assessee’s claim for depreciation on leasehold rights was withdrawn by the A.O in the preceding year by taking recourse to proceedings under Sec. 147 of the Act, the said fact on a standalone basis would divest the Pr. CIT from exercising his revisional jurisdiction for withdrawing such claim of depreciation on leasehold rights for the year under consideration. We are of a strong conviction, that as long as the requisite conditions for assumption of jurisdiction under Sec. 263 are satisfied by a revisional authority, no infirmity can be related to the validity of assumption of such jurisdiction by the said authority. On the basis of our aforesaid observations, we are unable to persuade ourselves to accept the contention of the ld. A.R, that the withdrawal of the assessee’s claim for depreciation for the immediately preceding year i.e. A.Y. 2011-12 by the A.O by taking recourse to re-assessment proceedings under Sec. 147, would debar the Pr. CIT from exercising his revisional jurisdiction under Sec. 263, despite the fact that the assessment order passed by the A.O allowing assessee’s claim for depreciation on leasehold rights was found by the revisional authority to be erroneous, insofar it was prejudicial to the interest of the revenue.” 8. Finally, with regard to mistake mentioned in Para 5.1, the assessee applicant has brought to our notice the discussion on the 263 order by the Tribunal and in our view, bench has reviewed the situation on the facts and not given any final findings on the validity and jurisdiction of the 263 order. Therefore, the assessee cannot insist on us to review the passing comments before reaching the final conclusions on jurisdiction. 9. In the backdrop of our aforesaid observations, we are of a strong conviction that the assessee on the aforesaid count too is seeking a MA.No. 123/MUM/2021 Goldmohur Design and Apparel Park Ltd., 13 review of our order in the garb of an application filed under Sec. 254(2) of the Act which is not permissible. 10. In the result, Miscellaneous Application filed by the assessee is dismissed. Order pronounced in the open court on 15.03.2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 15/03/2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, (Asstt. Registrar) ITAT, Mum